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If a company is trying to maximize its perceived value to external decision makers,the company is most likely to


A) understate the current assets.
B) understate the long-term liabilities.
C) understate the retained earnings.
D) understate the contributed capital.

E) A) and B)
F) None of the above

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Which of the following is not a recordable transaction?


A) Issued shares of stock to investors in exchange for cash contributions of $4,000.
B) Ordered inventory from suppliers for $3,000.
C) Sold equipment to another company for $3,000 and accepted a note from the company promising payment in 6 months.
D) Borrowed money from the bank by signing a promissory note for $2,000.

E) B) and C)
F) A) and B)

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Which one of the following would be listed as a long-term asset?


A) Cash
B) Supplies
C) Buildings and equipment
D) Prepaid insurance

E) A) and B)
F) C) and D)

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Use the following information as of December 31,2013,to calculate the amounts of cash and retained earnings.The company's total assets are $36,000.This company doesn't have any other accounts. Use the following information as of December 31,2013,to calculate the amounts of cash and retained earnings.The company's total assets are $36,000.This company doesn't have any other accounts.

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Cash: $5,0...

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General Motors (GM)signs a new labor agreement that its workers will receive a 5% wage increase next year.This is considered a transaction that affects GM's financial statements in the current year.

A) True
B) False

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If total assets increase,then either liabilities or stockholders' equity must also increase.

A) True
B) False

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What is the total amount of noncurrent assets?


A) $493,590
B) $824,310
C) $649,540
D) $305,950

E) B) and C)
F) A) and B)

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The common characteristic possessed by all assets is


A) long life.
B) great financial value.
C) physical substance.
D) future economic benefit.

E) A) and C)
F) A) and B)

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A company purchases $23,000 of supplies in the current month and promises to pay for them next month.How would the company record a liability for the supplies?


A) This liability is not a recognized liability until the payment is due.
B) $23,000 would be journalized as a credit to Accounts Payable.
C) $23,000 would be journalized as a debit to Accounts Payable.
D) $23,000 would be journalized as a debit to Prepaid Expenses.

E) A) and D)
F) C) and D)

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Which of the following statements is TRUE?


A) Transactions are analyzed from the standpoint of the owners.
B) All business activities are considered accounting transactions.
C) The transaction amount is determined for each exchange based on the cost of the items given and received.
D) A business needs journal entries only to show how transactions affect the balance sheet.

E) B) and D)
F) All of the above

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Which of the following scenarios could explain the journal entry below? Which of the following scenarios could explain the journal entry below? A) The company buys $10,000 of equipment for $4,000 in cash and $6,000 on credit. B) The company receives $4,000 in cash and $6,000 in notes payable for selling 10,000 of equipment. C) The company buys $10,000 of equipment,for $4,000 cash and a promise to cancel $6,000 of debt owed to it. D) The company sells $10,000 of equipment,for $4,000 in cash and pays off $6,000 it owes on the equipment.


A) The company buys $10,000 of equipment for $4,000 in cash and $6,000 on credit.
B) The company receives $4,000 in cash and $6,000 in notes payable for selling 10,000 of equipment.
C) The company buys $10,000 of equipment,for $4,000 cash and a promise to cancel $6,000 of debt owed to it.
D) The company sells $10,000 of equipment,for $4,000 in cash and pays off $6,000 it owes on the equipment.

E) A) and B)
F) A) and C)

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Which of the following statements is FALSE?


A) A transaction is an exchange or event that has a direct and measurable financial effect.
B) Every transaction has at least 2 effects.
C) Current assets are economic resources to be used or turned into cash within one year.
D) Notes payable is the account debited when money is borrowed from a bank using a promissory note.

E) C) and D)
F) All of the above

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The ledger consists of all of the accounts used by a business.

A) True
B) False

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You are pleasantly surprised to discover that a popular actress appears on The Tonight Show wearing your company's jeans.Later,your company's sales increase by $500,000 as a result.When the actress appeared on TV,you would have recorded an asset because the TV appearance was expected to bring future economic benefits to your company.

A) True
B) False

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How much financing did the stockholders of Purrfect Pets,Inc. ,directly contribute to the company?


A) $117,900
B) $662,100
C) $780,000
D) $1,398,100

E) B) and C)
F) A) and D)

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A company issues $20 million in new stock.It later uses the cash received to pay off promissory notes.How many different accounts and which account names are affected by these two transactions?


A) 3 accounts involved: contributed capital,cash,and notes payable.
B) 4 accounts involved: contributed capital,cash,investments,and notes payable.
C) 3 accounts involved: cash,contributed capital,and accounts payable.
D) 3 accounts involved: contributed capital,investments,and accounts payable.

E) A) and B)
F) B) and C)

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A hurricane destroyed a company's building that originally cost $1 million.Which of the following could not be true?


A) Assets remain the same,and liabilities and stockholders' equity both decrease by $1 million.
B) Assets decrease by $1 million,liabilities decrease by $1 million,and stockholders' equity is unchanged.
C) Assets,liabilities,and stockholders' equity all remain the same.
D) Assets decrease by $500,000,and liabilities decrease by $500,000.

E) B) and D)
F) B) and C)

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A company borrows $2 million from its bank.It then uses this money to buy equipment.How does this transaction affect the accounting equation?


A) Assets and Liabilities both rise $2 million.
B) Assets increase by $2 million and Liabilities decrease by $2 million.
C) Assets decrease by $2 million and Liabilities increase by $2 million.
D) Assets remain unchanged and Liabilities increase by $2 million.

E) None of the above
F) A) and D)

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How will a company's current ratio be affected by the purchase of equipment for cash?


A) The current ratio will increase because current assets increase.
B) The current ratio will decrease because current liabilities increase.
C) The current ratio will decrease because current assets decrease.
D) The current ratio will remain unchanged.

E) B) and D)
F) A) and C)

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Your company's president donates a large amount of her own money to charity and receives significant publicity that includes the company's name.How would the benefits of this publicity appear on the balance sheet?


A) It would appear as a current asset.
B) It would appear as contributed capital.
C) It would appear as a long-term asset.
D) It would not appear on the balance sheet.

E) A) and C)
F) A) and D)

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